A change proposed to GST arrangements by assistant treasurer
Arthur Sinodinos
raises the possibility of a rise in stamp duty on many commercial and rural property transactions.

The change was one of the 16 flagged through by Senator Sinodinos on Saturday to help clear the backlog of previously announced, but yet to be implemented, tax and superannuation measures.

For property, the key change is to the GST treatment of a going-concern.

Most commercial investments and agricultural properties are sold as going concerns and are GST-free.

The benefit is twofold. Firstly there is no loss of cash flow. If the deal was not GST-free, the tax would have to be paid and then claimed back.

Secondly the structure avoids additional stamp duty because stamp duty is levied on the GST-inclusive price of the transaction.

The GST partner at law firm DLA Piper, Matthew Cridland, said that in NSW for every $1 million of GST not paid, the saving in stamp duty was around $55,000.

Under the new arrangement, first proposed in the 2009-10 Budget and now to be introduced in 2014, ­going-concern transactions will attract GST but with a reverse charge ­mechanism. The reverse charge mechanism should ensure that the new measure has no cash flow implications.

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Instead of the vendor being liable for the GST, it will be the purchaser, and because the purchaser can report the transaction and claim the GST in one go, no money need change hands.

The big issue, said Mr Cridland, is the stamp duty implication.

“For the reverse charge to apply, the vendor and purchaser will need to agree in writing," he said.

“The state revenue authorities may view that as an assumed liability and an opportunity to charge stamp duty."

Mr Cridland said extra stamp duty should not be payable because “it is a tax liability imposed directly on the purchaser and not part of the consideration of the sale of the property".

Others in the property sector are also concerned about the unintended ­consequences of the change in the tax arrangement.

The Property Council’s executive director, international and capital markets division, Andrew Minho said the industry was “keen to work with government to ensure the measure is implemented appropriately without increasing the tax burden for industry".

Mr Cridland said the change could also catch call-option fees which to date have been treated, like the properties themselves, as GST tax-free.

He also noted uncertainty around the treatment of transitional arrangements for purchasers who contract before the new arrangements are legislated but who settle afterwards.

Senator Sinodinos said the moves cleared a backlog of measures and provided significant operational certainty for business and consumers.

“The Government is taking the necessary decisions to finally provide certainty on a large number of announced, but un-enacted taxation measures, the bulk of which were left behind by the ad hoc, dysfunctional process of decision-making of the former Labor government," he said. In all 92 tax and superannuation measures have been addressed. Eighteen were earlier flagged through by the Abbott government. On Saturday, Senator Sinadinos approved 16 and quashed 48.